The Carbon Hustle

Amid all of the post-election analysis, I’ve heard a lot of talk about climate change and the future of the energy industry in the U.S. under a second Trump administration, particularly concerning the Inflation Reduction Act signed into law by President Biden in 2022. A prominent feature of the IRA was the creation and expansion of tax incentives and subsidies for clean energy projects, which has benefited oil and gas giants who have the resources to invest in new green technology. 

There are a multitude of opinions on how to deal with the climate issue. Trump has made it clear that he wants to dismantle the IRA’s climate policies and green energy initiatives, and even members of his own party don’t wholeheartedly agree with that decision, but what’s caught my eye as a public choice student has been the response from the energy industry. 

ExxonMobil CEO Darren Woods went on the record pushing against Trump’s ideas for the IRA (ExxonMobil has been heavily investing in carbon capture technology, and the IRA provides large sources of funding for these long-term projects with its tax incentives) and instead offered another solution–more regulation on carbon. Why in the world would the CEO of one of the largest oil companies want more regulation? If you ask him, it’s because the climate crisis needs to be addressed, and more oil production would harm the domestic oil industry. I think Stigler would say, “regulation is a friend of the incumbent.” Regulation of carbon intensity could potentially create barriers to entry for foreign competitors and smaller domestic firms. Large, established firms like Exxon have the ability to, and already have been, strategically adapting to the changes in climate policies. It seems to me that special interests are pushing to retain the regulation they have already captured and are seeking more in the new market for green energy.